Let's suppose you need a new car. You an go to one of many internet sites and find out all about every car, including the sticker price, invoice price, available incentives, and more.
But, they are expensive and all that research is a hassle, so you've enrolled in this new car buying service. Just about everyone is doing it, so you jump on board. Here's how it works.
The plan lets you trade in your old car for a new one every five years. You sign up for the level of service you want. If you want a basic car, you take the bottom level plan. If you want a luxury car, you take the highest level plan. Based on the level of plan you select, you pay a certain amount into the plan each month.
For each plan level, there is a list of cars that qualify and the amount extra you have to pay for some options. For example, if have the basic plan and you want a sunroof, you pay $300. If you have the luxury plan , you pay $25. The trailer-towing package is only available with the luxury plan and is included for "free." Each service company has their own, distinct levels of plans and option menus.
The plan also covers any and all maintenance and repairs. This is pretty standard. After all, if you need a transmission rebuilt, that can get pretty pricey.
Time to buy a car. You look a the list of cars in your plan and pick one. You go to the dealer, find one you like. The window sticker shows MRSP of $75,000 plus $6000 for the sunroof and $5000 for the XM Radio. Total, $86,000. You don't pay much attention to this since you have "the service". The dealer swipes your service card. You give the dealer your old car, pay him $25 for the sunroof and $15 for the XM radio, and away you go.
Two weeks later, you get the statement from your car buying service. After staring at it for an hour you figure out that it shows they payed the dealer just $25,000 for the car and $1500 total for the options. They resold your old car for $10,000. Net paid out, $16,500.
You are paying $400 a month for this service.
Is it a good deal?
If you're sharp, you might be able to figure out the answer to this question. You have to figure out the current value of five years of payments, the likely service and repair costs, the residual value of your new car after three years, etc. Some will be hard to find. Since these buying services have dried up the internet car pricing databases and individual used car sales lists, you'll just have to take a swag at these. You also don't know what service and repairs really cost, either. There are super-high prices on the dealer's garage wall, but, you have the "service" and it's covered. You don't really care.
In then end, you find it's all very confusing and you quit. You can figure out what you're spending, but you really can't figure out the value of what you're getting in return. You can't even figure out which level plan is the best value since you can't find out what things really cost. It's all very opaque.
The "service" likes opaque. It's how they make their money.
What's happened? The car buying service has inserted itself between you and the car dealer/manufacturers. They negotiate the price between themselves. You have no idea what that price really is. You only see what you think is the price on that statement that comes weeks after you "buy" the car. You have no idea if there are incentive discounts or side deals between the service and the dealer/manufacturer.
You look in the financial section of the paper. Your car buying service is making a good profit. The car manufacturers are making a good profit. You know that the money you pay each month for the service is powering those profits, but your only real choice is to switch services - and they won't consider the trade value of the car you bought with your current service. Plus, they have an equally bewildering array of levels, lists of cars and prices on options. You're clueless and out of the loop.
Would any sane person sign up for such a thing? Is this any way to buy
Health insurance? Who put that in there?
We have the most expensive health care on the planet - but we don't get the best outcomes - in part because we are so disconnected from the price of the service, we have no idea what stuff costs....nor do we really care.
Getting more people covered by insurance doesn't fix anything to any real degree. It just gets more people into the game. What just might work, is taking down that opaque wall. Get real price tags on things, let us have some "skin in the game" and let us shop like we're buying a shirt at Macy's. Buying stuff. Hunting sales. That's something we're REALLY good at!
How about something like this? http://www.npr.org/blogs/health/2013/08/13/211643763/medical-discount-plan-in-nevada-skips-insurers (plus some, cheap catastrophic insurance...)